Tech stocks, long a gauge for the health of the market, are in focus this week with Silicon Valley up at the earnings confessional.
Heading into earnings from the likes of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Meta Platforms (NASDAQ:META), Apple (NASDAQ:AAPL) and more, investors will be looking for signs the country isn’t destined for a recession.
So far in 2022, things haven’t been so hot for the tech sector. The underlying Nasdaq Composite is down 26%. This week therefore may prove a major catalyst in either plugging the losses or opening the gates to a wider selloff.
Alphabet was first up to report. The Big Tech company missed earnings and revenue estimates, although by a slight enough amount that shares initially rallied. This early reaction could be a strong sign for its peers. Meta reports Wednesday, with Apple and Amazon to follow suit Thursday.
Investors appear to be bracing for the worst. Microsoft (NASDAQ:MSFT), Meta, Amazon and Apple all closed down on Tuesday. Beyond general recession worries, a layoff announcement from Shopify (NYSE:SHOP) is also weighing on the market.
Tech Stocks Slide as Recession Concerns Mount
Interestingly, as important as tech earnings are to the greater economic outlook, they’re not the only events to watch this week. On Wednesday, the Federal Reserve is expected to raise interest rates for the fourth time this year. Many anticipate the Fed will pass a 75- to 100-basis-point rate hike, a scary notion for highly leveraged tech companies.
Adding to the tension, on Thursday, the Q2 Gross Domestic Product (or GDP) report will debut. Economists estimate that production has fallen 1.6% for the second straight quarter, meeting the definition of a technical recession.
The White House has already gotten ahead of the GDP announcement, issuing a blog post on the matter. President Joe Biden argued that despite two straight quarters of falling GDP, the economy remains strong in other ways. The White House highlighted job growth and consumer spending as evidence the country wasn’t heading toward an economic slowdown.
Not everyone agrees — some argue Biden is attempting to “redefine a recession.” Either way, expect all of Wall Street and especially tech companies to be closely watching the GDP report for signs of things to come.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
